Starr Indemnity & Liability Co. v. SGS Petroleum Service Corp.
719 F.3d 700
5th Cir.2013Background
- This diversity case involves Starr Indemnity & Liability and SGS Petroleum, concerning coverage under a Starr excess policy with a pollution buy-back endorsement.
- The policy added to an absolute pollution exclusion an endorsement requiring reporting of pollution within 30 days after knowledge.
- An November 7, 2010 release was learned the same day; initial cleanup cost estimates were under $2M, within Allianz primary coverage.
- SGS did not notify Starr within 30 days because costs only exceeded $2M later in December 2010.
- SGS finally reported to Starr on January 5, 2011, fifty-nine days after learning of the release, prompting Starr to seek declaratory judgment that coverage did not apply.
- The district court granted Starr’s Rule 12(c) judgment on the pleadings and denied SGS’s motion for summary judgment; the Fifth Circuit affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 30-day notice in the buy-back is a condition precedent to coverage. | Starr: notice within 30 days is a bargained-for condition. | SGS: late notice may be excused if no prejudice. | No; 30-day notice is binding and coverage denied. |
| Whether Matador remains controlling law over prejudice requirement after PAJ/Prodigy. | Starr relies on Matador to deny coverage without prejudice. | SGS argues PAJ/Prodigy erode Matador's rule. | Matador remains tenable; PAJ/Prodigy do not disturb its application to negotiated buy-back endorsements. |
| Whether any ambiguity in the policy provisions exists that would favor SGS. | Starr asserts no ambiguity; the 30-day requirement controls. | SGS contends ambiguity due to concurrent provisions. | No ambiguity; the 30-day reporting requirement in the buy-back controls. |
Key Cases Cited
- Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653 (5th Cir. 1999) (notice endorsement essential to coverage, prejudice not required)
- PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008) (timely notice not essential where insured’s policy does not bargain for it; precludes prejudice rule in general)
- Prodigy Communications Corp. v. Agricultural Excess & Surplus Ins. Co., 288 S.W.3d 374 (Tex. 2009) (as soon as practicable notice not essential; prejudice rule applies if no essential bargain)
- Berkley Reg'l Ins. Co. v. Phil. Indem. Ins. Co., 690 F.3d 342 (5th Cir. 2012) (no different notice-prejudice rule for excess carriers)
- Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749 (Tex. App. 1999) (endorsements supersede conflicting main policy terms)